The Moderating Role of Director Compensation on the Effect of Acquisition on CEO Compensation of Acquiring Firms

• In Event: Financial Reporting--CEO and Acquisition

Abstract

This study examines the moderating role of changes in director compensation on the association between acquisition success and the post-acquisition changes in CEO compensation. Findings from the study suggest that directors are likely to support and ratify acquisitions that have the likelihood to increase directors’ equity compensation. The results of this study indicate that acquisitions lead to an increase in post-acquisition performance of the acquirer, providing support for the financial rationale motive for why management undertake acquisitions. The study did not find support for the moderating role of the changes in equity compensation of the board of directors on the association between acquisition and CEO compensation. The study shows that acquisition is negatively associated with changes in CEO compensation.

Keywords: Acquisition, CEO compensation, Board of directors, Equity Compensation

Authors

• AFUA ATAA BOAKYEWAA AGYEKUM, MORGAN STATE UNIVERSITY

• Huey-lian Sun, Morgan State University